Which of the following would cause dividends to decrease if the firm was using the residual dividend model?

Question

Quizplus · Accepted Answer

C) Net income decreases. In the residual dividend model, dividends are paid out of the leftover or "residual" earnings after all positive NPV projects have been funded. Therefore, if net income decreases, there would be less residual earnings available to pay out as dividends, leading to a decrease in dividends.

Which of the Following Would Cause Dividends to Decrease If